Update - Support for Canadian Journalism

Backgrounder

April 17, 2020

Budget 2019 had announced three tax measures intended to support Canadian journalism that include:

  • allowing certain journalism organizations to register as qualified donees;  
  • the Canadian journalism labour tax credit; and
  • the digital news subscription tax credit.

A necessary condition for journalism organizations to benefit from these measures, is Qualifying Canadian Journalism Organization (QCJO) status. In addition each measure has its own additional eligibility conditions. An Advisory Board is responsible for making recommendations to the Canada Revenue Agency (CRA) on whether a journalism organization meets certain criteria to receive the QCJO designation.

The Government is proposing a number of changes and clarifications to these measures that would apply retroactively to the coming into force dates of each of the measures. These draft legislative proposals are in line with the original policy intent of the journalism measures and would help ensure that support is available to Canadian journalism organizations.  

Support from the Canada Periodical Fund

Currently, in order to qualify for the Canadian journalism labour tax credit, an organization must not receive support from the Aid to Publishers component of the Canada Periodical Fund in the relevant taxation year. This restriction is intended to prevent the duplication of government support.

It is proposed that this rule be modified to permit organizations receiving amounts from the Aid to Publishers component of the Canada Periodical Fund to qualify for the Canadian journalism labour tax credit. To prevent duplication of support, an amount equal to any funding received from the Aid to Publishers component of the Canada Periodical Fund in a taxation year would be subtracted from the amount of the Canadian journalism labour tax credit that an organization would otherwise receive for that year. In other words, the amount that a QCJO would be entitled to receive under the Canadian journalism labour tax credit would be reduced for each dollar received from Aid to Publishers.

Requirement to Produce Original News Content 

To qualify as a QCJO, an organization must currently be primarily engaged in the production of original news content and must not be significantly engaged in the production of content:

  • to promote the interests, or report on the activities, of an organization, an association or its members;
  • for a government, Crown corporation or government agency; or
  • to promote goods or services.

It is proposed that this rule be modified to remove the “primarily” threshold from the requirement that a QCJO be engaged in the production of original news content. However, the requirement that an organization be primarily engaged in the production of original news content would continue to apply to organizations seeking to register as qualified donees. The requirement that a QCJO not be significantly engaged in the production of content to promote goods or services would also be removed. 

To ensure that the journalism measures continue to meet their policy objectives of supporting original written news content, the following related changes are also proposed:

Digital News Subscription Tax Credit

The digital news subscription tax credit is intended to be available for subscriptions providing original news content. 

It is proposed that the current rules be modified to clarify that, in order to qualify for the credit, a digital news subscription must entitle an individual to access content in digital form that is primarily original written news.

Canadian Journalism Labour Tax Credit

The Canadian journalism labour tax credit is intended to support the production of original written news content. In order to qualify as an eligible newsroom employee for the purposes of the credit, an individual is currently required to spend at least 75 per cent of their time engaged in the production of news content. 
It is proposed that this rule be modified to specify that an eligible newsroom employee must spend at least 75 per cent of their time engaged in the production of original written news content. 

Revoking QCJO Designation

An organization must be designated by the CRA in order to qualify as a QCJO, in addition to meeting other eligibility criteria.

It is proposed that an explicit mechanism be introduced for the CRA to revoke an organization’s designation where it no longer meets the requirements to qualify as a QCJO. A notice of revocation would be issued in writing and would provide the effective date of revocation. To provide certainty for subscribers under the digital news subscription tax credit, amounts paid by subscribers in the year in which an organization is no longer listed by the CRA as providing an eligible subscription (whether as a result of revocation of its designation or otherwise) would still qualify for this credit.

In making a determination to revoke an organization’s designation, the CRA would be required to consider any advice provided by the Advisory board established for the purpose of providing recommendations in respect of QCJO status.

Television and Radio Broadcasting 

The Canadian journalism labour tax credit and the digital news subscription tax credit are not available to broadcasters.

However, this rule may inadvertently disqualify written news organizations that carry on broadcasting activities that do not require a license, such as podcasts.  It is proposed that this rule be modified to clarify that this exclusion applies only to licensed broadcasters (e.g., TV and radio stations).  

Canadian Journalism Labour Tax Credit - Partnerships 

The Canadian journalism labour tax credit is intended to be available to partnerships, trusts and corporations. To ensure that this credit is available in respect of journalism organizations established as partnerships, it is proposed to enable the credit to be allocated to active members of a qualifying journalism organization that is a partnership. 

Canadian Journalism Labour Tax Credit - Eligible Expenses 

The Income Tax Act provides a $55,000 cap on the amount of eligible expenses that an organization can claim for each eligible newsroom employee that may qualify for the Canadian journalism labour tax credit. This cap is prorated for short taxation years. 

It is proposed that this rule be modified to also prorate this cap based on the proportion of an organization’s taxation year during which it qualifies as a qualifying journalism organization. For example, an organization that ceases to meet the criteria to qualify as a qualifying journalism organization halfway through a taxation year would be subject to half the usual cap (i.e., $27,500).

Digital News Subscription Tax Credit - Published List

The current rules relating to the digital news subscription tax credit allow the CRA to publish the names of organizations whose digital news subscriptions are eligible for the credit. 

It is proposed to clarify that the CRA may publish both the names of organizations whose digital news subscriptions are eligible for the credit and the qualifying subscriptions they offer. 

It is also proposed that organizations be required to inform subscribers if their subscriptions cease to qualify for the digital news subscription tax credit.


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